FCC to study whether payments to ISPs signal a broken marketplace

Comcast, Verizon, Cogent disputes could be a “warning sign,” FCC official says.

The Federal Communications Commission doesn’t know enough about the exchange of traffic on the Internet to determine whether it should issue regulations that might prevent disputes that degrade Internet service to consumers.

Milkman described how the FCC has historically regulated interconnections in the landline telephone and wireless markets, taking anything from a “lighter touch” rulemaking approach to price regulation. Connections involving Internet service providers, Internet “backbones,” Web services, and content delivery networks (CDNs) have avoided regulation, albeit with some bumps in the road.

Several disputes led to Internet service providers completely cutting off the “peering” connections between each other in the late '90s and mid-2000s, preventing the exchange of traffic, Milkman noted.

“We're also aware of more recent disputes that have erupted between Comcast and Level 3 in 2010 and between Cogent and Comcast and Verizon earlier this year,” she said. “Rather than de-peering outright, these disputes seemed to involve degradation of service arising from congestion at peering points, particularly during peak usage times.”

In those disputes, Comcast and Verizon complained that Cogent was sending too much Netflix video over connections where the companies exchange traffic without payment. Cogent refused to pay the ISPs, but Netflix itself eventually paid both Verizon and Comcast for direct connections to their networks, alleviating traffic problems.

“With such disputes as a backdrop, the FCC has received a lot of points of view on the manner in which the current traffic exchange regimes are or are not working,” Milkman said. “One question might be this: are these disputes just business negotiations that can be resolved adequately in the marketplace? Or are they a warning sign of a breakdown of a functioning marketplace of interconnection and traffic exchange on the Internet? We at the FCC don't know the answer, but we know we need to learn more about how the marketplace is or is not functioning.”

The FCC is seeking comment on a new set of network neutrality rules that will prevent ISPs from blocking Web services while allowing payments in exchange for priority access to consumers. Although the proposed rules would not regulate traffic exchange, the commission asked the public to weigh in on the issue as part of the net neutrality proceeding.

“Some parties have sought to expand the scope of the [proposed rules] to include issues related to Internet backbone providers, including issues of traffic exchange such as peering, transit and also CDNs,” Milkman said. “We're seeking comment on this question of scope in order to hear from those who may disagree with the suggested treatment of peering and traffic exchange, and we'll learn from those comments.”

Wheeler recently told a Congressional committee that peering is something that "the commission needs to look at and will be looking at." However, the FCC hasn’t created a standalone proceeding to examine the issue.

“At the moment, we have many more questions than answers,” Milkman said.

The ISPs (in the case of Comcast, at least) is collecting on both ends because it can. It's absurd to charge the content provider (Netflix) when the bill is already paid by the subscriber. I mean, it would be like a local gov't municipality charging a sports stadium a higher road tax because 80,000 drive to the stadium for a game.

The real reason behind these fees is the ISPs protecting their cable TV turf.

Perhaps the FCC or congress ought to examine separating the provisioning (dumb pipe) from the content. There would be less conflict of interest.

I'm sure the study will conclude that nothing is wrong and Wheeler's campaign financing will continue.

Wheeler is not in an elected position.

His critics essentially assert that he is "campaigning" for his post-FCC employment... However, perhaps a better analogy would be to compare him to an auctioneer:"We've got $200k from the gentleman over here on the right! Who'll go to $250K? Do I hear $250K? Right there: the big man with the gold tooth! Do I hear $300K? ..."

I don't think it would be necessary for the FCC to play traffic cop or even really have to use a heavy hand, IF and ONLY if they force cable companies to compete. As they pretty much use the same last mile equipment, I don't really see allowing this as a difficult option. So it should be relatively easy for WoW Cable, Charter, Cox, Optimum, RCN, or Comcast (or any that I did not mention) to service the same footprints. Forcing them to compete would be the swift kick in the pants needed to get prices/service under control (i.e. look what T-Mobile has done in wireless).

It depends, if the exercise is to determine whether ISPs should be classified as "common carriers".

The point of the study could be to show that applying unregulated free market principals to internet traffic is bad and has a clear and specific negative impact business.

Sure you can say "doesn't everyone know this already"... but it's not always about what you know, it's about what you can prove. That's why they do studies (granted the studies can also be ignored or labelled as "flawed").

Hmmm... all this bribery gives me an idea so crazy it just might work. Since corporations are people, you should be able to marry one. If an ISP and a person it would be to have a "baby," it would be a website. Therefore, we should get a person to marry Comcast and have them get divorced the next day. Then, that person should sue Comcast for child support to fund the fiber-to-the-home that the babies need.

how does an ISP guarantee speed to content when it's sitting in a data center three networks away?

By investing all that money they receive from subscribers (many of whom want that content 3 networks away) in upgrading their interconnections. The implicit promise of a high-speed internet connection is that you'll be able to access content anywhere in the world at a reasonable speed.

What makes disputes between ISPs different from other trade disputes? Why does this issue fall under the authority of the FCC and not the FTC.

I imagine there are literally thousands, if not millions, of commercial negotiations that go on every year that don't require government intervention. The only reason one side or the other takes the issue to the government is because they can. Unless there is an obvious abuse of bargaining power, I think the parties should work it out without government intervention.

Um... unless there is an obvious abuse of bargaining power... Have you been reading the articles that have been going up on this site? I personally think it is pretty obvious. I could be wrong I guess. But I don't think so.

how does an ISP guarantee speed to content when it's sitting in a data center three networks away?

By investing all that money they receive from subscribers (many of whom want that content 3 networks away) in upgrading their interconnections. The implicit promise of a high-speed internet connection is that you'll be able to access content anywhere in the world at a reasonable speed.

and the content still has to travel over 3 other networks and the edge provider still has to buy enough bandwidth to serve all their customers

Hmmm... all this bribery gives me an idea so crazy it just might work. Since corporations are people, you should be able to marry one. If an ISP and a person it would be to have a "baby," it would be a website. Therefore, we should get a person to marry Comcast and have them get divorced the next day. Then, that person should sue Comcast for child support to fund the fiber-to-the-home that the babies need.

Nah Comcast would only marry them with an ironclad prenup that gave custody to Comcast in the event of a separation.

What makes disputes between ISPs different from other trade disputes? Why does this issue fall under the authority of the FCC and not the FTC.

I imagine there are literally thousands, if not millions, of commercial negotiations that go on every year that don't require government intervention. The only reason one side or the other takes the issue to the government is because they can. Unless there is an obvious abuse of bargaining power, I think the parties should work it out without government intervention.

Um... unless there is an obvious abuse of bargaining power... Have you been reading the articles that have been going up on this site? I personally think it is pretty obvious. I could be wrong I guess. But I don't think so.

What makes disputes between ISPs different from other trade disputes? Why does this issue fall under the authority of the FCC and not the FTC.

I imagine there are literally thousands, if not millions, of commercial negotiations that go on every year that don't require government intervention. The only reason one side or the other takes the issue to the government is because they can. Unless there is an obvious abuse of bargaining power, I think the parties should work it out without government intervention.

Here are the facts as I see them as someone without inside knowledge (i.e. a lay man):

Someone signs up with Verizon -- they are paying Verizon to deliver them the content they request.That same someone signs up with Netflix -- they are paying Netflix to deliver them the content the request.Verizon says to Netflix "Those are some nice customers you have there, it'd be a shame if you couldn't reach them" and so Netflix has to pay Verizon to deliver the content that you requested -- which is actually what you are paying Verizon to do.

It's called double-dipping. It's called extortion. It should be called "illegal." Verizon is demanding protection money from Netflix. Verizon is threatening to not do what they are being paid to do, unless they're paid again by another party.

See, totally not broken! Now just let us get back to our money printing machine here...

They don't need to hand Wheeler a bag of cash. He's always happy to do a favor for his colleagues because he knows what decent guys they are, and he'll be taking over former FCC Chairman Michael Powell's job as President and CEO of the National Cable and Telecommunications Association when Powell moves on and Wheeler wraps up his term at the FCC. This isn't even in question, is it?

This is an age-old Washington trick. When you don't want to make a decision because it would piss off someone powerful, you commission a "study" that will take forever to complete. You hope that everyone forgets about the whole issue and goes away.

Wheeler knows damn well common carrier is the only answer here, he just doesn't want to be the one to make the call, so he is going to defer, defer and defer some more. "Studies" like this give him the fig leaf of pretending to do something.

The ISPs (in the case of Comcast, at least) is collecting on both ends because it can. It's absurd to charge the content provider (Netflix) when the bill is already paid by the subscriber. I mean, it would be like a local gov't municipality charging a sports stadium a higher road tax because 80,000 drive to the stadium for a game.

There's no problem with "charging twice" for something. People have this idea that a single entity should be charged 100% for a given service/product, when in fact it can be perfectly reasonable to split a bill so that different parties shoulder different portions of the total.

While I'd normally avoid car analogies here, you did mention higher road taxes on a stadium. It's actualy entirely normal to charge a large entity moving into an area impact fees for necessary upgrades to roads and intersections. And not just stadium-sized entities; even big-box stores often have to pay cities for the impact of development. This, despite the taxpayers of the city already paying for roads in general. Those impact fees are obviously passed along to customers, yet those customers aren't necessarily being "charged twice" for their roads either.

This isn't to say that the Comcast/Verizon deals are ethical or proper. Merely that this insistence that being "charged twice" for something is evidence of malfeasance per se is misguided.